California Statutory Wills Are Free
Questions and answers about California’s Statutory Will are presented here and in California Probate Code Section 6240.
The following information, in question and answer form, is not a part of the California Statutory Will. It is designed to help you understand about Wills and to decide if this Will meets your needs. This Will is in a simple form.
1. Does a Will avoid probate? No. With or without a Will, assets in your name alone usually go through the court probate process. The court’s first job is to determine if your Will is valid.
2. Are there different kinds of Wills? Yes. There are handwritten Wills, typewritten Wills, attorney-prepared Wills, and statutory Wills. All are valid if done precisely as the law requires. You should see a lawyer if you do not want to use this Statutory Will or if you do not understand this form.
3. What can a Will do for me? In a Will you may designate who will receive your assets at your death. You may designate someone (called an “executor”) to appear before the court, collect your assets, pay your debts and taxes, and distribute your assets as you specify. You may nominate someone (called a “guardian”) to raise your children who are under age 18. You may designate someone (called a “custodian”) to manage assets for your children until they reach any age from 18 to 25.
4. Does my Will give away all of my assets? Do all assets go through probate? No. Money in a joint tenancy bank account automatically belongs to the other named owner without probate. If your spouse, domestic partner, or child is on the deed to your house as a joint tenant, the house automatically passes to him or her. Life insurance and retirement plan benefits may pass directly to the named beneficiary. A Will does not necessarily control how these types of “nonprobate” assets pass at your death.
5. What happens if I die without a Will? If you die without a Will, what you own (your “assets”) in your name alone will be divided among your spouse, domestic partner, children, or other relatives according to state law. The court will appoint a relative to collect and distribute your assets.
6. May I change my Will? Yes. A Will is not effective until you die. You may make and sign a new Will. You may change your Will at any time, but only by an amendment (called a codicil). You can give away or sell your assets before your death. Your Will only acts on what you own at death.
7. When should I change my Will? You should make and sign a new Will if you marry, divorce, or terminate your domestic partnership after you sign this Will. Divorce, annulment, or termination of a domestic partnership automatically cancels all property stated to pass to a former husband, wife, or domestic partner under this Will, and revokes the designation of a former spouse or domestic partner as executor, custodian, or guardian. You should sign a new Will when you have more children, or if your spouse or a child dies, or a domestic partner dies or marries. You may want to change your Will if there is a large change in the value of your assets. You may also want to change your Will if you enter a domestic partnership or your domestic partnership has been terminated after you sign this Will.
8. May I add or cross out any words on this Will? No. If you do, the Will may be invalid or the court may ignore the crossed out or added words. You may only fill in the blanks. You may amend this Will by a separate document (called a codicil). Talk to a lawyer if you want to do something with your assets which is not allowed in this form.
9. Who may use this Will? This Will is based on California law. It is designed only for California residents. You may use this form if you are single, married, a member of a domestic partnership, or divorced. You must be age 18 or older and of sound mind.
10. Are there any reasons why I should NOT use this Statutory Will? Yes. This is a simple Will. It is not designed to reduce death taxes or other taxes. Talk to a lawyer to do tax planning, especially if (i) your assets will be worth more than $600,000 or the current amount excluded from estate tax under federal law at your death, (ii) you own business-related assets, (iii) you want to create a trust fund for your children’s education or other purposes, (iv) you own assets in some other state, (v) you want to disinherit your spouse, domestic partner, or descendants, or (vi) you have valuable interests in pension or profit-sharing plans. You should talk to a lawyer who knows about estate planning if this Will does not meet your needs. This Will treats most adopted children like natural children. You should talk to a lawyer if you have stepchildren or foster children whom you have not adopted.
11. What can I do if I do not understand something in this Will? If there is anything in this Will you do not understand, ask a lawyer to explain it to you.
12. Where should I keep my Will? After you and the witnesses sign the Will, keep your Will in your safe deposit box or other safe place. You should tell trusted family members where your Will is kept.
13. What is an executor? An “executor” is the person you name to collect your assets, pay your debts and taxes, and distribute your assets as the court directs. It may be a person or it may be a qualified bank or trust company.
14. What is a custodian? Do I need to designate one? A “custodian” is a person you may designate to manage assets for someone (including a child) who is under the age of 25 and who receives assets under your Will. The custodian manages the assets and pays as much as the custodian determines is proper for health, support, maintenance, and education. The custodian delivers what is left to the person when the person reaches the age you choose (from 18 to 25). No bond is required of a custodian.
15. What is a guardian? Do I need to designate one? If you have children under age 18, you should designate a guardian of their “persons” to raise them.
16. Should I ask people if they are willing to serve before I designate them as executor, guardian, or custodian? Probably yes. Some people and banks and trust companies may not consent to serve or may not be qualified to act.
17. Should I require a bond? You may require that an executor post a “bond.” A bond is a form of insurance to replace assets that may be mismanaged or stolen by the executor. The cost of the bond is paid from the estate’s assets.
18. What happens if I make a gift in this Will to someone and that person dies before I do? A person must survive you by 120 hours to take a gift under this Will. If that person does not, then the gift fails and goes with the rest of your assets. If the person who does not survive you is a relative of yours or your spouse, then certain assets may go to the relative’s descendants.
19. What is a trust? There are many kinds of trusts, including trusts created by Wills (called “testamentary trusts”) and trusts created during your lifetime (called “revocable living trusts”). Both kinds of trusts are long-term arrangements in which a manager (called a “trustee”) invests and manages assets for someone (called a “beneficiary”) on the terms you specify. Trusts are too complicated to be used in this Statutory Will. You should see a lawyer if you want to create a trust.
20. What is a domestic partner? You have a domestic partner if you have met certain legal requirements and filed a form entitled “Declaration of Domestic Partnership” with the Secretary of State. Notwithstanding Section 299.6 of the Family Code, if you have not filed a Declaration of Domestic Partnership with the Secretary of State, you do not meet the required definition and should not use the section of the Statutory Will form that refers to domestic partners even if you have registered your domestic partnership with another governmental entity. If you are unsure if you have a domestic partner or if your domestic partnership meets the required definition, please contact the Secretary of State’s office.
21. What is community property? Can I give away my share in my Will? If you are married and you or your spouse earned money during your marriage from work and wages, that money (and the assets bought with it) is community property. Your Will can only give away your one-half of community property. Your Will cannot give away your spouse’s one-half of community property.
California Tax Information For Same-Sex Married Couples
An advance draft copy of a California tax form for same-sex married couples is now available. It is subject to change and Franchise Tax Board (FTB) approval before it is officially released. This form includes the 2008 legislative changes. It will likely be released by the FTB as Publication 776.
This publication is primarily to assist same-sex married couples (SSMC) in filing their California income tax returns, if they have SSMC adjustments. The FTB has also included information about the legal history of SSMC and community property that may be useful in completing the return.
On June 20, 2008, the FTB issued NOTICE 2008-5 on the subject of California Income Tax Treatment and Tax Return Filing Obligations of Same-Sex Married Couples. The purpose of the Notice is to advise same-sex married couples of their California income tax treatment and tax return filing obligations resulting from the California Supreme Court’s recent decision in In re Marriage Cases (2008) 43 Cal.4th 757.
California’s FTB has more information on same-sex married couples’ tax obligations at its website.
California Lawyer’s Duty To Preserve Your Will
New California Probate Code Section 710 describes your attorney’s duty of care to preserve the estate planning documents you decide to leave with him or her and which he or she agrees to keep for you. Here is what the California law provides:
If a document is deposited with an attorney, the attorney, and a successor attorney that accepts transfer of the document, shall use ordinary care for preservation of the document on and after July 1, 1994, whether or not consideration is given, and shall hold the document in a safe, vault, safe deposit box, or other secure place where it will be reasonably protected against loss or destruction.
Your California lawyer’s duty to hold the living trust or will in a safe, vault, safe deposit box, or other secure place is a reasonable one, and allows reasonable periods for the document to be out of safekeeping for the purpose of examination or delivery in appropriate circumstances. At all times the document should be reasonably protected against loss or destruction, although what is reasonable may vary with the circumstances.
Discuss safekeeping your California will and living trust with Mitchell A. Port, a Los Angeles estate planning attorney who drafts those documents for his clients.
Revocation Of California’s Advance Health Care Directive
After working with your attorney in Los Angeles to avoid probate in California by preparing your will, living trust, durable power of attorney for property management and the advance health care directive, you now decide you want to revoke the directive. How?
California law provides that a patient having capacity may revoke the designation of an agent only by a signed writing or by personally informing the supervising health care provider. California law goes on to say that a patient having capacity may revoke all or part of an advance health care directive, other than the designation of an agent, at any time and in any manner that communicates an intent to revoke.
In other words, you may revoke the designation or authority only if, at the time of revocation, you have sufficient capacity to make a power of attorney for health care. The burden of proof is on the person who seeks to establish that you did not have capacity to revoke the designation or authority.
Discuss your estate plan with an experienced attorney. Call Mitchell A. Port in Los Angeles at 310.559.5259.
Checklist To Close Your California Business
When closing a business in California, there is much to do. Some of the following suggestions may require help from your tax attorney or CPA.
You must file an annual return for the year you go out of business. If you have employees, you must file the final employment tax returns, in addition to making final federal tax deposits of these taxes.
The annual tax return for a partnership, corporation, S corporation, limited liability company or trust includes check boxes near the top front page just below the entity information. For the tax year in which your business ceases to exist, check the box that indicates this tax return is a final return. If there are Schedule K-1s, repeat the same procedure on the Schedule K-1.
You will also need to file returns to report disposing of business property, reporting the exchange of like-kind property, and/or changing the form of your business. Below is a list of typical actions to take when closing a business, depending on your type of business structure:
Checklist
Make final federal tax deposits
Electronic Federal Tax Paying System (EFTPS)
OR
Form 8109-B
File final quarterly or annual employment tax form
Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return
Form 941, Employer’s Quarterly Federal Tax Return
Form 943, Employer’s Annual Tax Return for Agricultural Employees
Form 943-A, Agricultural Employer’s Record of Federal Tax Liability
Issue final wage and withholding information to employees
Form W-2, Wage and Tax Statement
Report information from W-2s issued
Form W-3, Transmittal of Income and Tax Statements
File final tip income and allocated tips information return
Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips
Report capital gains or losses
Form 1040, U.S. Individual Income Tax Return
Form 1065, U.S. Partnership Return of Income
Form 1120 (Schedule D), Capital Gains and Losses
Report partner’s/shareholder’s shares
Form 1065 (Schedule K-1), Partner’s Share of Income, Credits, Deductions, etc.
Form 1120S (Schedule K-1), Shareholder’s Share of Income, Credits, Deductions, etc.
File final employee pension/benefit plan
Form 5500, Annual Return/Report of Employee Benefit Plan
Issue payment information to sub-contractors
Form 1099-MISC, Miscellaneous Income
Report information from 1099s issued
Form 1096, Annual Summary and Transmittal of U.S. Information Returns
Report corporate dissolution or liquidation
Form 966, Corporate Dissolution or Liquidation
Consider allowing S corporation election to terminate
Form 1120S, Instructions
Report business asset sales
Form 8594, Asset Acquisition Statement
Report the sale or exchange of property used in your trade or business
Form 4797, Sales of Business Property
Contact local and California state agencies.
Speak with a California business attorney about this and your other business questions. Call Mitchell A. Port.
California Passes Mandatory Electronic Payment Law
New Section 19011.5 of the California Revenue & Taxation Code requires some taxpayers to make their tax payments using an electronic method which California calls “mandatory e-pay”.
There is a one percent penalty of the amount paid unless the failure to pay electronically was for reasonable cause and not willful neglect.
As a California tax attorney, I don’t know and the law remains unclear whether the penalty applies to those who are employees and who make regular tax payments by having employee withholding done by their employer.
In California, beginning January 1, 2009, personal income taxpayers whose tax liability is greater than $80,000 or who make an estimated tax or extension payment that exceeds $20,000 for taxable years beginning on or after January 1, 2009, must send the payment electronically. Once either of these conditions is met, all payments regardless of type, amount, or tax year must be remitted electronically by credit card, Electronic Funds Withdrawal (EFW), or web pay.
Taxpayers whose tax thresholds fall below the mandatory e-pay amounts may request to discontinue making electronic payments. In March 2009, the California Franchise Tax Board will provide a waiver form for taxpayers to file.
On December 1, the California Franchise Tax Board sent courtesy letters to taxpayers who made a payment in 2008 that could qualify them for mandatory e-pay. The letter informed these taxpayers of the law change, and that they may meet the mandatory e-pay threshold in 2009.
Taxing Amazon.com Complicated by Tangled Forest of Tax Laws
Should states be able to collect state sales tax on internet purchases and catalogue sales that cross state lines? That’s the issue that’s currently confronting state governments around the country desperate for revenues in these poor economic times. In theory, it is grossly unfair for a purchase that is made online to be taxed less than an identical item purchased at a “bricks and mortar” store (individuals are technically subject to use tax on their internet purchases but it is almost impossible to enforce). But in practice, taxation of remote sales falls victim to legal barriers as well as decentralized tax policies.
The most recent Supreme Court decision to address this issue, Quill Corp. v.
Thus presents the Amazon.com dilemma. Its “wholly owned subsidiaries” own thousands of square feet of distribution facilities in several states according to the Wall Street Journal. Although they are legally separate, there is a debate as to whether they constitute a nexus. It’s fairly common practice for companies to establish “shell companies” to take advantage of tax loopholes that allow them to expand operations without expanding tax liability. Several states, including
Wells Fargo Tax Giveaway (Finally) Attracting Some Notice
Better late than never?
The truth of this saying may be tested in coming weeks, as lawmakers and regulators grapple with the question of how to fix an under-the-radar corporate tax break for a few large banks (the federal tax cut for Wells Fargo alone has been estimated at over $20 billion, and the new tax break overall could cost US taxpayers $140 billion) that seems to have been approved without Congress agreeing to it.
A Citizens for Tax Justice report from last week outlines the story:
When one company buys another company that has tax losses, the law prevents the acquiring company from using the purchased company’s tax losses. There’s a very sensible reason for this rule: to ensure that companies don’t purchase other companies simply as a tax dodge.
But a little-noticed September IRS administrative ruling creates a specific, temporary exemption from this rule for banks acquiring other banks whose tax losses are attributable to bad loans.
It’s not that often that a new tax cut gets implemented without Congress ever lifting a finger, but that’s what happened when the Bush Administration’s Treasury officials decided to reinterpret an existing law in a way that would cut taxes dramatically for a few well-off banks. Senator Charles Grassley, who’s accustomed to being at the steering wheel (or at least in the car!) when the tax policy express hits the road, is very angry about it, although he’s stopped short of saying that the Administration’s move is illegal.
Yesterday’s Washington Post has a detailed story discussing how this came about, and today’s Los Angeles Times has this story noting that the state if California stands to lose a couple of billion dollars of its own corporate income tax revenue to boot.
This is obviously an important issue for Congress– the bailout was unpopular enough before it became widely known that it was being hijacked to benefit a few big corporations, so Congressional tax writers have a real incentive to clean this mess up in a way that makes it clear the bailout ultimately benefits America’s economy, not a few fat cats.
But, as Citizens for Tax Justice notes in its analysis of the problem, this is also something state lawmakers need to worry about:
Because states with corporate income taxes almost universally base their corporate taxes on federal rules, federal tax cuts for corporations generally result in state tax cuts as well. When affected states have rules making it difficult to enact tax increases (as istrue of California, whose budget deficit is already in the billions of dollars), state governments find themselves practically unable to avoid costly corporate tax cuts they never wanted… At least eighteen states that tax corporate profits will likely take a hitfrom the new IRS ruling—and any state that taxes the profits of financial companies is at riskof helping to fund the next bank that chooses to purchase another financial company.
With state budgets already going up in flames, this is a problem state lawmakers don’t need. Stay tuned…
California: Smart Sales Tax Reform Isn’t Dead Yet
When it comes to sales tax reform, the policy answers are pretty straightforward: Unless you’ve got a really good reason to do otherwise, whatever people buy should be subject to tax. It shouldn’t matter where you buy it (on the ‘net or in a store); it shouldn’t matter what color or size it is. Individual purchases should be subject to sales tax. Period.
So from a policy perspective, it’s not especially surprising to see this sort of idea emerging from California: Judy Chu, the chair of the state’s Board of Equalization, is recommending expanding the state sales tax base in a way that could yield up to $10 billion a year.
From state lawmakers’ perspective, the main reason for doing this is adequacy. Since $10 billion is the ballpark estimate for next year’s state budget deficit, anything they can find to plug that hole will be welcome.
But Chu is telling a story that’s much more about consistency and fairness– and she’s right:”We tax exercise equipment, but we don’t tax health club services. We tax movie rentals, but we don’t tax movie admissions,” Chu said.
Of course, tax reform isn’t just about the policy– it’s also about the politics. And judging from recent experience in Maryland and Michigan, the politics are a lot murkier than the policy on this issue. In each of these states, recent efforts to expand the base have been almost immediately repealed. Our Tax Justice Digest takes a quick crack at explaining why reform efforts failed in these states here. For more details on how to broaden your state’s sales tax base, check out our policy brief here.
WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ –
* Kay Bell reports in her post “
California Tax Refunds on Hold” at DON’T MESS WITH TAXES that “the state’s controller says that if lawmakers don’t come up with a way to cover California’s $42 billion budget deficit, on Feb. 1 he will put a 30-day hold on tax refunds and some other payments”.* Another reason not to rely on tax software, such as Turbo Tax, if you don’t know what you are doing. Kay Bell reports in her post “Geithner — and TurboTax — Grilled Again” that “Geithner acknowledged that he had used TurboTax”.
The “Turbo Tax Defense” doesn’t work in Tax Court – but apparently it works in Congress.
* Kay Bell also writes on taxes for Bankrate.com. She has begun a daily series of tax tips. Friday’s tip – “Second Chance for Economic Stimulus Check” – included the observations and insights of two of her fellow tax bloggers – Bruce the taxguy and yours truly.
* Fellow twit Cindy Morus gives us “Top 10+ Ways to Jumpstart your New Year’s Finances!” over at MEND YOUR MONEY. The list includes – “Set up an appointment with your tax professional early”. Only not too early – make sure you have all your “stuff” before you see your tax pro!
While it is not on the list, an earlier post from Cindy suggests that you “Update Your Beneficiaries”.
* If you missed the online-radio interview with Kristine McKinley of EBIZ TAX TIPS conducted by the “eBay Selling Coach” you can click here to listen.
Also appearing on an online radio program this week was TAXGIRL Kelly Phillips Erb discussing Small Biz Taxes. Click here to listen.
* Peter Pappas of THE TAX LAWYER’S BLOG suggests that we “Repeal the Corporate Income Tax and Bring Those Jobs Back Home”. Be sure to read my comment.
* June Walker provides an excellent and creative answer to a question from a psychiatrist who was confused by the Turbo Tax software treatment of psychological software he purchased in her also excellently titled post, “
Software Cannot Replace Experience”. The highlights below are mine.“Dear Dr. Mark,
You see, I’ve been feeling really depressed. Suicidal actually. I bought this software program Mind-Mend. Says it has taken 20+years of psychiatric experience and rolled it up into this software program. There are 10 steps to avoiding stress. One step says do 15 minutes of meditation each day. Another step has me stand on my head for 10 minutes so that my circulation increases. My gym instructor says I should not stand on my head because of an old army injury. I am confused, what should I do?
As a doctor you might tell me that stress and suicidal tendencies call for different levels of treatment as well as different levels of urgency and that I should speak with a professional. You might also say that there is no way that 20 years personal experience could be put into a software program and have the same success rate as weekly visits with a therapist when treating something as complex as suicide.
This is my round-about of saying what I have said on this blog many times before: A software program written for the simple world of employees cannot replace a tax pro experienced with indie tax situations.”
* Professor James Maule has some interesting comments on depreciation in his post “Just Because It Didn’t Work the First 50 Times Doesn’t Mean It Will Work Next Time” at MAULED AGAIN.
”The depreciation provisions . . . have contributed to the current economic mess by allowing taxpayers to compute taxable income as though their economic position declined when in fact it remained the same or improved”.
Jim agrees with what I discussed at TWTP in my post “Here is Something to Think About”. He discusses the idea in more detail in “Instead of More Favorable Depreciation Deductions, Eliminate Them?
”.Goose the Tax Dog (I am assuming Goose is the name of the Dog) also adds his 2 cents on the topic in his post “Real Estate Depreciation” at THE TAX STUDENT.
I would be interested to hear your comments on what I propose in this post.
* TAXGIRL Kelly Phillips Erb points out that it seems that somewhere someone from the press is giving out bad information on BO’s stimulus package in her post “Ask the taxgirl: Don’t Look for a Second Rebate Check in the Mail!”.
Read my, and Kelly’s, lips – THERE WILL NOT BE ANOTHER “STIMULUS” REBATE CHECK! While he didn’t take my advice regarding refundable credits, at least BO listened to me about rebates.
* Right on Prof Daniel Shaviro of START MAKING SENSE – “Happiest word in the English language {is} ‘Ex”, when placed with a dash in front of the words ‘President George W. Bush’.”
* A great Q+A post from Gina Gwozdz at TAX TIPS BLOG on “
1099 vs W2?” She makes the excellent point – “Your employer does not get to decide if they can pay you as a W-2 employee or a 1099 contractor. The law determines your classification.”* Trish McIntyre of OUR TAXING TIMES provides the word on the economic “stimulus” rebate you did or didn’t receive last year in her post “Stimulus Rebate-Taxable This Year?”. The answer, of course, is NO – for both federal and state returns.
Trish points out that you could get an additional rebate added to the refund, or subtracted from the balance due, on your 2008 Form 1040 or 1040A – “For example, the full stimulus rebate a married couple with one child could receive was $1500. A child born in 2008 qualifies the couple for an extra $300.”
The 2008 “stimulus” rebate election year bribe caused tons and tons of confusion last year, completely overwhelming the IRS – and I expect the confusion to continue to apply to 2008 tax returns. As was the case with the last rebate check, there will be millions of errors on 2008 federal returns.
* I came across an interesting bit of information in my “wanderings” on Thursday – “The Association of Chartered Certified Accountants, the global body for professional accountants, views the U.S. tax regime as one of the world’s most complex, according to Chas Roy-Chowdhury, London-based head of taxation.”
* In item from Freep.com (Detroit Free Press) titled “Tax Rebate Impact on Economy is Weak” we learn “Two University of Michigan economics professors have some advice for President Barack Obama about how not to design his economic stimulus package. Their advice: Don’t make tax rebates a big part of it.”
The professors confirm what I have been saying all along – “Onetime payments from the government are a weak economic stimulus”.
Some statistics from the article – ”The U-M economists found that only 20% of U.S. households mostly spent their tax rebates, while about 48% used their rebate mostly to pay debt and roughly 32% mostly saved their rebate checks.”
* Always leave ‘em laughing – you will find some good parenting advice from BUSINESS PUNDIT in the post “
Always Check Your Child’s Homework Before it Gets Turned In”.TTFN